This report has cleared the Treasury Inspector General
for Tax Administration disclosure review process and information determined to
be restricted from public release has been redacted from this document.

August
26, 2004

\MEMORANDUM
FOR COMMISSIONER, WAGE AND INVESTMENT DIVISION

FROM:(for) Gordon C. Milbourn III /s/ Daniel R.
Devlin

Acting Deputy Inspector General
for Audit

SUBJECT:Final Audit Report - The Effectiveness of
the Kiosk Program Cannot Be Determined (Audit # 200440022)

This
report presents the results of our review of the Internal Revenue Service’s (IRS)
Kiosk Program.The overall objective of
this review was to determine whether the Kiosk Program provides effective
customer service to taxpayers.

The IRS
introduced the Kiosk Program in 1998 with seven kiosks located in three
states.The Program has since expanded
to 38 kiosks located in 20 states.Locations of the kiosks include Taxpayer Assistance Centers (TAC), post
offices, Federal and state offices, libraries, and a mini-mall.The
Kiosk Program is part of the IRS’ efforts to broaden its use of electronic
interactions by providing more education and assistance through convenient,
easy to use self-assistance channels.

The current goal of the
Kiosk Program is to provide taxpayers with an alternative method of obtaining Federal and state tax forms and answers to
frequently asked tax questions in English and Spanish.The IRS’ vision for the future of the
Kiosk Program is to provide taxpayers with the ability to self-sufficiently
resolve their own tax needs and decrease the need for taxpayers to seek live
assistance from the IRS at TACs.This
would allow the IRS to refocus resources from the traditional prefiling work of
assisting taxpayers at the TACs to providing face-to-face assistance to
taxpayers with compliance issues.

The IRS cannot determine
whether the Kiosk Program provides effective customer service or is
cost-effective because of insufficient internal controls and management
oversight.Although the Kiosk Program
has been in place since 1998, the IRS has yet to develop guidelines or processes
to efficiently and effectively monitor the Program.For example, internal controls to ensure the Program is operating
as intended have not been developed.In
addition, processes have not been developed to:

·Measure whether the Kiosk Program is meeting its
goal of providing taxpayers with the ability to self‑sufficiently resolve
tax issues.

·Ensure
information provided on kiosks is current, accurate, and consistent.

·Ensure kiosks
are placed in the most optimal locations.

·Educate
taxpayers on the benefits and location of the kiosks.

The
Kiosk Program plays an integral role in the IRS’ future concept of
self-assistance customer service.To date, the IRS has spent approximately $685,900 to
purchase, update, and maintain kiosks without the ability to ensure taxpayers
or the IRS have benefited from these expenditures.During the review, results were shared with
IRS management.In response, management
initiated discussions with responsible kiosk vendors and internal stakeholders
to begin to address the concerns raised and to obtain suggestions for improving
and enhancing the Program.

However,
additional actions are needed to ensure the Kiosk Program provides effective
customer service.We recommended the
Commissioner, Wage and Investment Division, develop guidelines and strategies to enable the efficient and effective
monitoring of the Kiosk Program.Processes need to be developed to monitor taxpayer usage and
satisfaction; ensure information is current, accurate, and consistent; monitor
kiosk functionality; optimally place kiosks; and educate taxpayers on the
benefits and locations of kiosks.

Management’s Response:IRS
management is pleased we acknowledged the critical role the Kiosk Program plays
in the IRS’ future concept of self-assistance customer service.They recognize improvements are needed in the
Program and agree with our recommendations.Corrective actions will include:

·Installing the
Customer Satisfaction Survey on all kiosks and using survey results to identify
additional services or information needed.

·Requiring annual
certification that the information on the kiosks is current and accurate.

·Using the
Service Delivery Model (SDM) to determine the optimal location of kiosks.

·Developing a
communication plan to educate taxpayers on the benefits and locations of
kiosks.

Management’s
complete response to the draft report is included as Appendix VI.

Copies of this
report are also being sent to the IRS managers affected by the report
recommendations.Please contact me at
(202) 622-6510 if you have questions or Michael R. Phillips, Assistant
Inspector General for Audit (Wage and Investment Income Programs), at (202) 927-0597.

The Internal Revenue Service (IRS)
introduced the Kiosk Program in 1998 with seven kiosks located in three
states.The Program has since expanded
to 38 kiosks located in 20 states.(See
Appendix V for the specific states where kiosks are located.)Locations of the kiosks include Taxpayer
Assistance Centers (TAC), post offices, Federal and state offices, libraries,
and a mini-mall.

The Kiosk Program is part of the IRS’ efforts to broaden its
use of electronic interactions by providing more education and assistance
through convenient, easy to use self-assistance channels.The current goal of the Kiosk Program is to
provide taxpayers with an alternative method of obtaining
Federal and state tax forms and answers to frequently asked tax questions.This assistance is also to be provided in
Spanish.The IRS’ vision for the
future of the Kiosk Program is to provide taxpayers with the ability to
self-sufficiently resolve their own tax needs and decrease the need for
taxpayers to seek live assistance from the IRS at TACs.This is to be accomplished by providing more
kiosk locations in both staffed and virtual TACs, as well as storefronts.Providing taxpayers with the ability to
self-sufficiently resolve their own tax needs will then allow the IRS to
refocus resources from the traditional prefiling work of assisting taxpayers at
the TACs to providing face‑to-face assistance to taxpayers with
compliance issues.

The IRS has contracts with outside vendors to purchase the
kiosks, including the computer hardware and software that run the kiosks.Once the kiosks are purchased and placed, the
vendors assist the IRS in performing informational updates and capturing data
on usage and maintenance.

This review was performed at the IRS Customer Assistance,
Relationships, and Education function in the Wage and Investment Division
Headquarters in Atlanta, Georgia, with visits to the following sites where
kiosks are located:El Segundo,
California; Hartford and Waterbury, Connecticut; Edison, New Jersey; and
Columbus, Ohio, during the period February through May 2004.The audit was conducted in accordance with Government Auditing Standards.Detailed information on our audit objective, scope, and methodology is
presented in Appendix I.Major contributors
to the report are listed in Appendix II.

The IRS cannot determine whether the Kiosk Program provides
effective customer service or is cost-effective because of insufficient
internal controls and management oversight.Although the Kiosk Program has been in place since 1998, the IRS has yet
to develop guidelines or processes to efficiently and effectively monitor the
Program.

No system of internal controls exists to ensure the Kiosk
Program is operating as intended and meeting its goals and objectives

There are no documented internal controls, guidelines, policies,
or procedures for the Kiosk Program to measure and monitor whether the Program
is meeting its goal of providing effective customer service.For example, balanced measures and
performance goals have not been established, an analysis has not been performed
to determine if the costs expended equate to the customer service benefit
provided to taxpayers, and a strategy has not been developed outlining
long-term goals as well as the measures to be used to determine whether the
goals are being met.

No process exists to monitor kiosk usage and taxpayer
satisfaction

Although kiosks have the ability to capture data on both
taxpayer usage and taxpayer satisfaction, the IRS does not currently analyze
these data to identify trends or areas for improvement.Each kiosk has software provided by the
vendor that tabulates usage characteristics including language, tax form
viewed, and Frequently Asked Questions (FAQ) viewed or printed.In addition, some but not all kiosks contain
a survey to capture information on the taxpayers’ experiences using the
kiosks.The IRS was aware of this
capability but has not used the data to monitor the Program.

No process exists to ensure information provided on
kiosks is current, accurate, or consistent

Visits to the five kiosks sampled identified that the
information provided on them was not current or accurate.In addition, the information was not
consistent from kiosk to kiosk.For
example:

·One kiosk provided FAQs only in English, even
though the IRS is required to provide them in Spanish.Based on discussions with the vendor, this
condition exists on 22 (58 percent) of the 38 kiosks nationwide.Executive Order 13166, Improving Access to
Services for Persons With Limited English Proficiency (LEP), was put in
place to ensure the programs and activities that Federal Government agencies
normally provide in English are accessible to the LEP population.However, the IRS has not ensured all kiosks
provide information in languages to meet the needs of the LEP population.

·One kiosk had outdated FAQs.The FAQs available related to tax law for Tax
Year 2001 rather than for the current Tax Year 2003.Based on discussions with the vendor, this
condition exists on 22 (58 percent) of the 38 kiosks nationwide.

Because the kiosks are stand-alone and not networked or
connected to the Internet, manual updates are required.IRS management stated that the vendors
responsible for maintaining the kiosks were also responsible for performing
these updates.However, there is no
guidance on performing updates or controls for the IRS to ensure the kiosks are
being timely updated with the same accurate information.

In addition, one kiosk sampled was found not to be
operating.Management was unaware the
kiosk was not functioning.There was no
internal process to monitor kiosk functionality or an external process for
taxpayers to report problems with a kiosk.

No process exists to ensure kiosks are placed in the most
optimal locations

Since the establishment of the Kiosk Program, placement has
been based on criteria established at the time the kiosks were purchased.Some kiosks are located in areas that no
longer meet current coverage goals. For
example:

·From 1998 to 1999, kiosks were placed in the
TACs to reduce wait times.Thirteen
kiosks are currently colocated with TACs or an IRS field office.

·From 2001 to 2003, kiosks were placed in
locations based on recommendations of the IRS’ design teams.The design teams recommended 49 kiosks be
placed in 21 states.

·Current placement of kiosks is based on a model
that targets geographic areas in an attempt to provide 85 percent of taxpayers
that file a tax return within a geographic area with the ability to obtain
customer assistance within a 45-minute commute.Several kiosks are placed in areas where the service delivery exceeds 85
percent and may no longer be necessary.

Additionally,
placement of kiosks has not involved internal stakeholders such as the
Multilingual Initiative Project and the Stakeholder Partnerships, Education,
and Communication Offices, both of which are instrumental in delivering
customer service to underserved segments of the taxpaying public.One kiosk the IRS purchased has been in a
warehouse since January 2004 because a determination has yet to be made on its
placement.

Further, the
IRS has not developed a strategy to identify locations for future placement of
kiosks.No budgetary commitments have
been made outlining anticipated growth in the Program.Instead, kiosks are purchased at the end of
the fiscal year with excess funds and the IRS then attempts to identify a
location for placement.

No process exists to educate taxpayers on the benefits and
locations of the kiosks

The only vehicle that educates taxpayers about the IRS Kiosk
Program and kiosk locations is on the IRS web site (IRS.gov) in English but not
in Spanish.This information is not
always current.As of April 1, 2004, the
IRS had expanded service to include 38 kiosks in 20 states, but as of April 16,
2004, the web site provided information on only 30 kiosks.

IRS.gov may not be the most effective method to educate
taxpayers about kiosks since the information on kiosks is the same information
available on IRS.gov.If taxpayers have
access to IRS.gov to find a kiosk, they would not need to use the services a
kiosk offers.

Insufficient internal controls and managerial oversight
resulted in inefficient use of IRS resources

Inadequate
management oversight, including insufficient internal controls, policies, and
procedures, have resulted in the inability of the IRS to ensure the Kiosk
Program is meeting its goal of providing an alternative method for taxpayers to
seek customer service.If management
does not improve oversight and internal controls, there is a risk that the IRS’
vision for the future of the Kiosk Program will not be met.

The Government Accountability Office (formerly the General
Accounting Office) Standards of Internal Controls in the Federal Government
state that internal controls are a major part of managing an organization.They comprise the plans, methods, and
procedures used to meet missions, goals, and objectives.

To
date, the IRS has spent approximately $685,900 to purchase, update, and maintain
kiosks without the ability to ensure taxpayers or the IRS have benefited from
these expenditures.The IRS estimates
that 54 million taxpayers reside in the states
where kiosks are located.Without
ensuring the information provided is useful, the IRS may be increasing taxpayer
burden should taxpayers rely on inaccurate information.

As the IRS moves forward in developing the necessary
processes to effectively and efficiently monitor its Kiosk Program, it might refer
to the Department of Housing and Urban Development (HUD) as a best practice on
the use of kiosks.The HUD has
demonstrated the ability to deliver effective customer service by placing
web-based kiosks in public areas nationwide to provide information on a 24
hour/7 day a week basis to citizens who do not have access to the
Internet.The HUD’s web-based kiosks are
networked and Internet-enabled, allowing the kiosks to be updated quickly and
easily, and keeping them consistent with the HUD web site.All content is printable and available in
both English and Spanish.The HUD’s
kiosks have been recognized with the prestigious “Pioneer Award” by e-Gov and
with the Excellence in Government Award.

During the review, results were shared with IRS management.In response, management initiated discussions
with responsible kiosk vendors and internal stakeholders to begin to address
the concerns raised and to obtain suggestions for improving and enhancing the
Program.However, additional actions are
needed to ensure the Kiosk Program provides effective customer service.

d.
Ensure
kiosks are placed in the most optimal locations, including coordination with
key internal stakeholders.

Management’s
Response:IRS management agreed with
this recommendation and will take the following corrective actions:

·Develop guidelines for analyzing usage reports
and other information on the kiosks to identify trends, issues, and areas
needing improvement.

·Install the Customer Satisfaction Survey on all
kiosks and use the survey results to identify additional services or
information needed to help taxpayers meet their tax obligations.

·Develop a Kiosk Checklist requiring field
personnel to certify annually that the information on the kiosks is current and
accurate.

·Develop a standardized operational review guide
for the Kiosk Program to ensure consistency in the review process.

·Use the Service Delivery Model (SDM) to
determine the optimal location of kiosks.The SDM provides data on where IRS services are located in relation to
where taxpayers live.

2.Develop a process to educate
taxpayers on the benefits of the Kiosk Program, including the locations of
kiosks.

Management’s Response:IRS management agreed with this
recommendation and will determine the feasibility of expanding access to IRS
information using HUD kiosks, develop a communication plan to educate taxpayers
on the benefits and locations of kiosks, and ensure information on the kiosks
meets the needs of taxpayers who do not speak English.

The overall objective of this review was to determine
whether the Kiosk Program provides effective customer service for
taxpayers.To accomplish this objective,
we:

I.Determined whether the goals and strategies of the
Kiosk Program agree with the goals and strategies of the Internal Revenue
Service (IRS) and the Wage and Investment Division and whether the IRS has an
effective method to monitor the Program.

A.Obtained and reviewed IRS guidance and documentation to
identify the intended benefits of the Kiosk Program for both taxpayers and the
IRS and held discussions with management to determine whether these benefits
are being realized.

B.Obtained any reports or documentation on the Kiosk
Program (e.g., documents showing how the IRS tracks the expenses, provides
oversight, and measures progress and success).

II.Determined whether the information provided on kiosks
is current, accurate, and consistent.

A.Determined
whether the IRS has an effective process to ensure information contained on
kiosks is current, accurate, and consistent.We interviewed vendors to verify the process.

B.Selected a judgmental sample of 5 of 38 kiosk locations in
California, Connecticut, New Jersey, and Ohio to review the information
contained on the kiosks to determine whether the information was current,
accurate, and consistent among kiosks.We selected the El Segundo, California; Edison, New Jersey; and Columbus,
Ohio, kiosk locations because we
were able to perform the test while performing an audit test for another
ongoing audit.We selected the Hartford and Waterbury,
Connecticut, kiosk locations
because of their proximity to our Andover Office.

C.If the kiosks were found to contain information that was
not current, accurate, and consistent, determined why and attempted to assess
the effect(s) on taxpayers and the IRS.

III.
Determined
whether the IRS effectively captures usage and measures taxpayer satisfaction
with the Kiosk Program by holding discussions with management.

IV.Determined
whether the IRS places kiosks in the most optimal locations and educates
taxpayers on their benefits and locations by holding discussions with
management, locating kiosks, and determining the accuracy of management information.

This appendix presents detailed information on the measurable
impact that our recommended corrective actions will have on tax
administration.This benefit will be
incorporated into our Semiannual Report to the Congress.

Type and Value of Outcome Measure:

·Inefficient Use of Resources – Actual;
approximately $685,900 in purchase, update, and maintenance costs for kiosks
(see page 2).

Methodology Used to Measure the Reported Benefit:

We analyzed the Kiosk Investment
Template provided by Field Assistance office management detailing the purchase
costs and dates, along with annual maintenance costs, for the 38 kiosks
purchased since 1998.

We determined the cost to purchase 38 kiosks since
1998 to be over $465,600 as follows:

We determined the update and maintenance costs of the kiosks since 1998
to be over $220,200 based on the following:

·We determined the number of years
each kiosk has been owned by the IRS.We
subtracted the 1-year service agreement to determine the number of years the IRS
paid for upgrades and maintenance.We
then multiplied these years by the annual flat rate maintenance and upgrade
cost per kiosk by vendor as provided by the IRS.